Ayala-led ACEN has secured a Php13.7 billion loan to fund the transition of its 270-megawatt South Luzon Thermal Energy Corporation (SLTEC) coal-fired power plant in Calaca, Batangas.

In a statement on Monday, ACEN said it has signed an amended and restated omnibus loan and security agreement. The loan facility will be used to refinance SLTEC’s outstanding Php9.8 billion loan facility and to fund the partial redemption of ACEN’s capital in SLTEC. Proceeds of the equity redemption will be used to reinvest in Ayala’s renewable energy (RE) projects. 

The Bank of the Philippine Islands (BPI) and the Rizal Commercial Banking Corporation (RCBC) will finance the said transition. BPI and RCBC have expressed willingness to fund RE projects, with the latter cutting its exposure to coal power ventures. 

The loan concept adopts the principles of the Energy Transition Mechanism (ETM), which the  Asian Development Bank (ADB) piloted in Southeast Asia. Through the ETM, public, private and philanthropic financing is used to provide low-cost capital to accelerate the retirement of coal-fired power plants.

ACEN announced in October last year that it will be retiring the SLTEC plant by 2040, or 15 years ahead of the end of its technical life. This is in line with the company’s goal to have an all-RE portfolio by 2025 and the Ayala group’s net-zero greenhouse emissions goal by 2050.

“In leading the energy transition, enabling mechanisms such as the ETM help accelerate our shift to a low carbon growth path and unlock new renewable energy investments,” said ACEN President and CEO Eric Francia.

“Energy transition will not be possible without responsible and proactive private sector actors. We commend the Ayala group and ACEN for the signing of this groundbreaking transaction, which is consistent with ADB’s Energy Transition Mechanism to provide a pathway from fossil fuels to renewable energy,” ADB Vice President Ahmed Saeed said. 

The Bangko Sentral ng Pilipinas has also urged banks in the country to fund the ETM in the Philippines.